The Li Corp. plans to sell its products for $25 each. Its variable cost per unit = $15, and its fixed costs for the year = $10,000. What level of sales will Li need to make a profit of $200,000?
A) 1,000 units
B) 20,000 units
C) 21,0000 units
D) 30,000 units

Question

Quizplus · Accepted Answer

To achieve a profit of $200,000, Li Corp. needs to cover both its fixed costs and the desired profit. The contribution margin per unit is $25 - $15 = $10. The total amount needed to cover both fixed costs and the desired profit is $10,000 (fixed costs) + $200,000 (desired profit) = $210,000. Dividing this total by the contribution margin per unit ($10) gives the number of units needed to be sold: $210,000 / $10 = 21,000 units.